The government's financial operations during the quarter, emphasizing the revenue generation and the allocation of funds across various sectors.

1. Revenue Collection:
   • Total Revenue: TZS 7,273.6 billion.
   • Tax Revenue: TZS 6,334.4 billion, representing 87.1% of the total revenue.
   • Percentage of Target Achieved: 93.2% of the targeted revenue.
   • The strong performance was primarily due to income taxes and local government collections.
2. Government Expenditure:
   • Total Expenditure: TZS 8,912.3 billion.
   • Recurrent Expenditure: TZS 5,225.2 billion.
   • Development Expenditure: TZS 3,687.1 billion.
3. Fiscal Deficit:
   • The government faced a fiscal deficit, given that expenditures (TZS 8,912.3 billion) exceeded revenue collections (TZS 7,273.6 billion).
4. National Debt:
   • Total Debt Stock: USD 42,359.7 million.
   • External Debt: USD 30,201.7 million (71.3% of the total debt).
   • Domestic Debt: USD 12,158 million (28.7% of the total debt).

The fiscal operations insights into Tanzania's economic development during the quarter ending June 2024

The fiscal operations reveal that Tanzania is focused on economic development through substantial investments in infrastructure and public services. However, the fiscal deficit and high debt levels suggest the need for careful management to ensure long-term sustainability and avoid potential economic challenges.

1. Revenue Collection and Economic Activity

• Total Revenue (TZS 7,273.6 billion): The government was able to collect a substantial amount of revenue, indicating robust economic activity. High revenue collection, especially from taxes (TZS 6,334.4 billion), reflects strong economic performance, as businesses and individuals are generating income and profits, contributing to tax revenues.
• 93.2% of the Revenue Target Achieved: Although the government fell slightly short of its revenue target, achieving over 90% indicates effective tax collection mechanisms and a relatively healthy economy.

2. Expenditure and Economic Growth

• High Total Expenditure (TZS 8,912.3 billion): The government is spending significantly on both recurrent and development expenditures. This level of spending can stimulate economic growth, particularly through development projects, which contribute to infrastructure development, job creation, and long-term economic benefits.
• Development Expenditure (TZS 3,687.1 billion): A substantial portion of the budget is dedicated to development, which is crucial for fostering sustainable economic growth. This suggests that the government is investing in sectors that can boost productivity, such as infrastructure, education, and healthcare.

3. Fiscal Deficit and Economic Sustainability

• Fiscal Deficit: The fiscal deficit (expenditures exceeding revenues) could indicate that the government is either investing heavily in growth-driving projects or is facing challenges in balancing its budget. While moderate deficits can be sustainable if they are funding growth, persistent large deficits could lead to increased borrowing, which may pose risks to economic stability if not managed well.

4. National Debt and Future Economic Pressure

• Total Debt Stock (USD 42,359.7 million): Tanzania’s debt levels are high, with a significant portion (71.3%) being external debt. While borrowing can finance development, high debt levels might constrain future fiscal space and could lead to increased debt servicing costs. This could pressure the government to generate higher revenues in the future or cut back on expenditures, which could impact economic growth.

5. Economic Development Implications

• Investment in Development: The significant development expenditure indicates a focus on long-term economic growth, which could enhance productivity and improve living standards in Tanzania over time.
• Revenue Growth: The strong revenue collection, particularly from taxes, suggests a growing economy with increasing business activity and individual incomes, which are positive indicators of economic development.
• Debt Concerns: The high level of national debt, especially external debt, might be a concern for future economic stability. The government will need to ensure that the debt is used effectively for growth-enhancing projects and that debt levels remain sustainable.

The external sector showed signs of improvement, driven by increased exports and a reduction in the current account deficit, despite a slight increase in imports.

1. Current Account Deficit:
   • The current account deficit narrowed to USD 902.8 million in the quarter ending June 2024, down from USD 977.8 million in the same quarter in 2023. This improvement was largely due to strong export performance and favorable global commodity prices.
2. Exports:
   • Total exports of goods and services increased to USD 3,377.1 million in the quarter ending June 2024, up from USD 2,998.3 million in the corresponding quarter of 2023.
   • Traditional Exports: Increased to USD 115.5 million from USD 80.2 million.
   • Non-Traditional Exports: Reached USD 1,639.7 million, up from USD 1,554.8 million.
   • Gold Exports: Rose to USD 774.3 million from USD 759.1 million in the same period in 2023.
   • Key contributors to the export growth include tourism, gold, and tobacco.
3. Imports:
   • The total imports of goods and services saw a slight increase to USD 3,747.6 million in the quarter ending June 2024, compared to USD 3,754 million in the same period in 2023.
4. Foreign Exchange Reserves:
   • Tanzania's foreign exchange reserves remained robust at USD 5,345.5 million, covering 4.4 months of projected imports. This is in line with both national and East African Community (EAC) benchmarks.

The external sector performance with economic development

The external sector's performance reflects Tanzania's ongoing efforts toward economic development. The improvements in export performance, reduction in the current account deficit, and stable foreign reserves indicate a positive trajectory, contributing to overall economic growth, stability, and resilience against external shocks.

1. Export Growth:
   • The increase in total exports of goods and services, from USD 2,998.3 million to USD 3,377.1 million, indicates a strengthening of Tanzania's productive capacity and global competitiveness. The growth in traditional and non-traditional exports, particularly in gold, tourism, and agricultural products like tobacco, reflects diversification and resilience in the country's economy. This export performance is crucial for generating foreign exchange, supporting the Tanzanian shilling, and contributing to economic stability.
2. Reduction in Current Account Deficit:
   • The narrowing of the current account deficit from USD 977.8 million to USD 902.8 million is a positive sign. It suggests that Tanzania is improving its balance of payments position, likely due to increased export earnings and potentially more sustainable levels of import consumption. A lower deficit reduces reliance on external borrowing, enhancing the country’s financial stability and fostering a more favorable environment for investment.
3. Stable Foreign Exchange Reserves:
   • Tanzania's foreign exchange reserves, covering 4.4 months of imports, reflect a strong buffer against external shocks. This level of reserves provides confidence in Tanzania’s ability to meet its international obligations and protect the economy from volatile external conditions, such as fluctuating commodity prices or global financial instability. Stable reserves are also crucial for maintaining investor confidence and ensuring the smooth operation of trade.
4. Implications for Economic Growth:
   • The positive performance in the external sector is generally associated with stronger economic growth. Increased exports, especially in high-value sectors like gold and tourism, can lead to higher GDP growth. Moreover, the ability to manage the current account deficit and maintain stable foreign reserves suggests that the government’s economic policies are effectively supporting sustainable economic development.
5. Sectoral Development:
   • The growth in specific sectors like tourism, agriculture, and mining indicates progress in diversifying the economy, which is critical for reducing dependency on any single industry. This diversification helps mitigate risks and ensures more balanced and inclusive economic growth.

Latest Economic update from the Bank of Tanzania's Economic Development for the quarter ending June 2024

1. GDP Growth: Tanzania's GDP grew by an estimated 5.4% in the second quarter of 2024. Annual growth is also projected at 5.4%, driven by sectors such as agriculture, construction, mining, and financial intermediation.
2. Inflation: The headline inflation rate slowed to 3.1% in the quarter ending June 2024, down from 4.0% in the corresponding period of 2023. The stable inflation is attributed to effective fiscal and monetary policies and a sufficient domestic food supply. Inflation is expected to remain below 5%.
3. Monetary Policy: The Bank of Tanzania maintained a 7-day interbank rate within a (+/-) 200 basis point range of the 6% Central Bank Rate (CBR), averaging 7.49%. Money supply growth slowed to 10.3%, aligning with efforts to moderate liquidity and anchor inflation expectations at a medium-term target of 5%.
4. Private Sector Credit: Credit to the private sector grew by 17.2%, with significant contributions from the agricultural, manufacturing, and mining sectors. Personal loans also accounted for a substantial share of the growth.
5. Government Fiscal Operations: Revenue collection for the quarter ending March 2024 was TZS 7,273.6 billion, with tax revenue amounting to TZS 6,334.4 billion. Government expenditure was TZS 8,912.3 billion, with recurrent activities and development projects accounting for TZS 5,225.2 billion and TZS 3,687.1 billion, respectively.
6. External Sector: The current account deficit narrowed to USD 902.8 million, attributed to strong export performance and favorable global commodity prices. Exports of goods and services increased to USD 3,377.1 million, with tourism, gold, and tobacco being key contributors. Foreign exchange reserves remained robust at USD 5,345.5 million, covering 4.4 months of projected imports.
7. National Debt: The total national debt was USD 42,359.7 million at the end of June 2024, with 71.3% being external debt.

The key aspects of Tanzania's economic development, indicating steady progress and stability in various sectors

Tanzania is on a path of steady economic growth, with strategic investments in key sectors, effective monetary and fiscal management, and a focus on maintaining stability. These elements are fundamental for achieving long-term economic development and improving the overall standard of living for its population.

1. Steady GDP Growth:

• GDP Growth: The projected GDP growth of 5.4% reflects consistent economic expansion. Sectors such as agriculture, construction, and mining, which are crucial for Tanzania’s development, are driving this growth. This suggests that the country is continuing to invest in infrastructure and natural resources, contributing to overall economic development.

2. Low and Stable Inflation:

• Inflation: The inflation rate of 3.1% is well within the government's target, demonstrating effective management of monetary policy. Low inflation helps maintain purchasing power and encourages investment, which is essential for sustainable economic growth.

3. Support for Private Sector Growth:

• Private Sector Credit Growth: The 17.2% growth in credit to the private sector, particularly in agriculture, manufacturing, and mining, indicates that these sectors are receiving the necessary financial support to expand. This is crucial for job creation, income generation, and industrialization, which are key pillars of economic development.

4. Government Fiscal Discipline:

• Fiscal Operations: The government's focus on collecting substantial revenue and managing expenditure effectively reflects a commitment to fiscal discipline. The balance between recurrent and development expenditures indicates a focus on both maintaining government operations and investing in long-term projects that will drive future growth.

5. Robust External Sector:

• Current Account Deficit and Exports: The narrowing of the current account deficit, driven by strong exports in tourism, gold, and tobacco, indicates a healthy external sector. This not only brings in foreign exchange but also strengthens Tanzania’s position in the global market, which is essential for economic resilience and development.
• Foreign Exchange Reserves: Maintaining robust foreign exchange reserves is crucial for stabilizing the economy against external shocks, which supports long-term economic development.

6. National Debt Management:

• National Debt: While the national debt is significant, the fact that a large portion is external suggests ongoing international investment and borrowing to support development projects. Proper management of this debt is critical for sustaining economic development without leading to fiscal stress.

Overall Implications for Economic Development

• Diversification and Industrialization: The emphasis on sectors like agriculture, manufacturing, and mining indicates efforts toward diversifying the economy and moving away from over-reliance on a few commodities. This diversification is crucial for long-term economic stability and growth.
• Investment in Infrastructure: The growth in construction reflects ongoing investment in infrastructure, which is vital for supporting other sectors of the economy, such as trade and industry.
• Social and Economic Stability: Low inflation and stable fiscal policies contribute to a predictable economic environment, which is attractive to both domestic and foreign investors. This stability is essential for sustained economic development.

The 2023/24 financial report of the Bank of Tanzania

1. Monetary Policy and Inflation:
   • The Bank maintained a 7-day interbank rate within a (+/-) 200 basis point range of the 6% Central Bank Rate (CBR), with an average rate of 7.49%.
   • Money supply growth slowed to 10.3%, which reflects the Bank's efforts to moderate liquidity and maintain inflation expectations at its medium-term target of 5%.
   • Inflation decreased to 3.1% in the quarter ending June 2024, from 4.0% in the corresponding period in 2023, driven by effective fiscal and monetary policies as well as sufficient domestic food supply.
2. Private Sector Credit Growth:
   • Private sector credit grew at 17.2%, driven primarily by the agricultural, manufacturing, and mining sectors, with personal loans accounting for the largest share.
3. Government Revenue and Expenditure:
   • Revenue collection for the quarter ending March 2024 amounted to TZS 7,273.6 billion, with TZS 6,334.4 billion derived from tax revenue, which was 93.2% of the target.
   • Government expenditure totaled TZS 8,912.3 billion, with recurrent activities and development projects accounting for TZS 5,225.2 billion and TZS 3,687.1 billion, respectively.
4. National Debt:
   • The national debt stock was USD 42,359.7 million by the end of June 2024, with 71.3% of this being external debt and 28.7% public domestic debt.
5. External Sector Performance:
   • The current account deficit narrowed to USD 902.8 million from USD 977.8 million in the same quarter in 2023, supported by strong export performance and favorable global commodity prices.
   • Exports of goods and services increased to USD 3,377.1 million, with tourism, gold, and tobacco being key contributors.

Tanzania's economic landscape during the 2023/24 period

Tanzania is on a path of steady economic development, with a focus on maintaining monetary stability, supporting private sector growth, and effectively managing government finances. The improvements in the external sector and inflation control further indicate that the country is managing its economic challenges well, positioning itself for sustained growth in the future. However, careful management of external debt and continued investment in key sectors will be essential to ensure long-term economic prosperity.

1. Monetary Stability and Inflation Control:

• Inflation Control: The Bank of Tanzania has successfully kept inflation at a low level, decreasing it to 3.1% from 4.0% in the previous year. This indicates effective monetary policy management, which is crucial for economic stability and growth.
• Monetary Policy: The maintenance of the 7-day interbank rate within a set range and controlled money supply growth (10.3%) shows the Central Bank's focus on stabilizing the economy and managing liquidity, which supports long-term economic development.

2. Private Sector Growth:

• Credit Growth: The significant growth in private sector credit (17.2%), particularly in key sectors like agriculture, manufacturing, and mining, points to a robust expansion in economic activities. The emphasis on these sectors is essential for economic diversification and sustainability.
• Sectoral Investment: The focus on personal loans and investments in critical sectors suggests a growing confidence in the economy, with increased access to credit likely stimulating further economic development and job creation.

3. Government Revenue and Expenditure:

• Revenue Performance: The government's strong revenue collection performance, achieving 93.2% of its target, indicates effective tax administration and fiscal discipline. This is vital for funding public services and infrastructure, which are key drivers of economic growth.
• Balanced Expenditure: The balanced allocation of expenditure between recurrent activities and development projects suggests a strategic approach to fostering both immediate and long-term economic growth. The emphasis on development projects, in particular, is crucial for improving infrastructure and enhancing the country's productive capacity.

4. National Debt Management:

• Debt Sustainability: The national debt, which stood at USD 42.4 billion, with a significant portion being external debt (71.3%), reflects the country's reliance on external financing. While this can support development projects, it also underscores the importance of sustainable debt management to avoid long-term economic vulnerabilities.

5. External Sector Performance:

• Export Growth: The increase in exports, particularly in tourism, gold, and tobacco, suggests a strengthening external sector. This is positive for economic development, as it brings in foreign exchange and supports the balance of payments.
• Current Account Deficit: The narrowing of the current account deficit indicates improved trade performance, which is crucial for external stability and economic resilience.

The depreciation of the Tanzania shilling, marked by a 1.0% monthly decline and a 12.5% annual drop, reflects broader economic challenges. Addressing these challenges will require a combination of monetary policy adjustments, fiscal measures, and strategies to enhance economic stability and investor confidence.

Overview of Depreciation:

The Tanzania shilling has experienced notable depreciation recently:

1. Monthly Depreciation:
   • June 2024 Exchange Rate: TZS 2,626.07 per USD
   • Previous Month (May 2024) Exchange Rate: TZS 2,599.05 per USD
   • Monthly Change: TZS 27.02 (Depreciation of approximately 1.0%)
2. Annual Depreciation:
   • June 2024 Annual Depreciation: 12.5% compared to the same month in the previous year

Detailed Breakdown:

1. Monthly Depreciation:

• Calculation: The shilling depreciated by TZS 27.02 per USD from May to June 2024.
• Percentage Change: Percentage Change=(New Rate−Old Rate/Old Rate)×100
• Percentage Change=(2,626.07−2,599.05/2,599.05)×100≈1.0%

Implications: A 1.0% depreciation in one month suggests a relatively moderate decline, but it highlights a trend of weakening in the currency, possibly driven by economic factors like trade imbalances or inflation.

2. Annual Depreciation:

• Calculation: A 12.5% depreciation over the year represents a significant weakening.
• Implications: This substantial annual depreciation can lead to higher import costs, increased inflation, and potentially reduced purchasing power for Tanzania consumers. It reflects underlying issues such as trade deficits, inflationary pressures, or capital outflows.

Factors Contributing to Depreciation:

1. Trade Imbalances:
   • Trade Deficits: Persistent trade deficits can put downward pressure on the currency as the demand for foreign currencies to pay for imports exceeds the supply from exports.
2. Inflationary Pressures:
   • Domestic Inflation: Higher inflation rates relative to trading partners can erode the currency's value as purchasing power decreases.
3. Capital Flight:
   • Outflows: Significant capital outflows or reduced foreign investment can contribute to a weaker currency by increasing demand for foreign currencies.
4. Economic Uncertainties:
   • Market Sentiment: Economic uncertainties, including political instability or changes in economic policy, can affect investor confidence and lead to currency depreciation.

Economic Implications:

1. Impact on Imports and Inflation:
   • Higher Costs: A weaker shilling increases the cost of importing goods and services, contributing to inflationary pressures. This can affect the cost of living and business operations.
2. Effect on Investment:
   • Investment Climate: Currency depreciation can affect the investment climate, potentially deterring foreign investors due to increased risk or lower returns in local currency terms.
3. Policy Responses:
   • Monetary and Fiscal Measures: The central bank might need to adjust monetary policy, such as raising interest rates or implementing measures to stabilize the currency. Fiscal policy adjustments could also be necessary to address the underlying economic issues contributing to the depreciation.

Kupungua kwa thamani ya shilingi ya Tanzania, kumekuwa na kupungua kwa asilimia 1.0 kwa mwezi na asilimia 12.5 kwa mwaka, kunadhihirisha changamoto kubwa za kiuchumi. Kukabiliana na changamoto hizi kutahitaji mchanganyiko wa marekebisho ya sera za fedha, hatua za kifedha, na mikakati ya kuimarisha utulivu wa kiuchumi na imani ya wawekezaji.

Muonekano wa Kupungua: Shilingi ya Tanzania imepata kupungua kwa thamani kwa kiasi kikubwa hivi karibuni:

1. Kupungua kwa Mwezi:
   • Kiwango cha Kubadilishana cha Juni 2024: TZS 2,626.07 kwa USD
   • Kiwango cha Kubadilishana cha Mwezi wa Tano (Mei 2024): TZS 2,599.05 kwa USD
   • Mabadiliko ya Mwezi: TZS 27.02 (Kupungua kwa takriban asilimia 1.0%)
2. Kupungua kwa Mwaka:
   • Kupungua kwa Mwaka wa Juni 2024: Asilimia 12.5 ikilinganishwa na mwezi huo huo mwaka uliopita

Ufafanuzi wa Kina

1. Kupungua kwa Mwezi:
   • Hesabu: Shilingi imepungua kwa TZS 27.02 kwa USD kutoka Mei hadi Juni 2024.
   • Mabadiliko ya Asilimia: Mabadiliko ya Asilimia = (Kiwango Kipya − Kiwango Kilichopita / Kiwango Kilichopita) × 100
   • Mabadiliko ya Asilimia: = (2,626.07 − 2,599.05 / 2,599.05) × 100 ≈ 1.0%

Matokeo: Kupungua kwa asilimia 1.0 kwa mwezi mmoja kunaashiria kupungua kwa kiasi kidogo, lakini kunaonyesha mwenendo wa kudhoofika kwa sarafu, pengine kwa sababu ya sababu za kiuchumi kama vile ukosefu wa usawa katika biashara au mfumuko wa bei.

1. Kupungua kwa Mwaka:
   • Hesabu: Kupungua kwa asilimia 12.5 kwa mwaka kunaashiria kudhoofika kwa kiasi kikubwa.
   • Matokeo: Kupungua kwa mwaka huu kunaweza kusababisha gharama kubwa za kuagiza, kuongezeka kwa mfumuko wa bei, na pengine kupungua kwa nguvu ya kununua kwa watumiaji wa Tanzania. Hii inadhihirisha matatizo ya msingi kama vile upungufu wa biashara, shinikizo la mfumuko wa bei, au mtiririko wa mitaji.

Mambo Yanayochangia Kupungua

1. Ukosefu wa Usawa katika Biashara:
   • Upungufu wa Biashara: Upungufu wa biashara unaendelea unaweza kuweka shinikizo la chini kwa sarafu kadri mahitaji ya fedha za kigeni kwa ajili ya kulipa kuagiza yanavyozidi usambazaji kutoka kwa mauzo ya nje.
2. Shinikizo la Mfumuko wa Bei:
   • Mfumuko wa Bei wa Ndani: Viwango vya juu vya mfumuko wa bei ikilinganishwa na washirika wa biashara vinaweza kupunguza thamani ya sarafu kadri nguvu ya kununua inavyopungua.
3. Mtiririko wa Mitaji:
   • Mtiririko: Mtiririko mkubwa wa mitaji au uwekezaji wa kigeni ulioongezeka unaweza kuchangia kudhoofika kwa sarafu kwa kuongeza mahitaji ya fedha za kigeni.
4. Kutokuwa na Uhakika wa Kiuchumi:
   • Maoni ya Soko: Kutokuwa na uhakika kiuchumi, ikiwa ni pamoja na kutokuwepo kwa uthabiti wa kisiasa au mabadiliko katika sera za kiuchumi, kunaweza kuathiri imani ya wawekezaji na kusababisha kupungua kwa sarafu.

Matokeo ya Kiuchumi

1. Athari kwa Kuagiza na Mfumuko wa Bei:
   • Gharama za Juu: Shilingi dhaifu huongeza gharama za kuagiza bidhaa na huduma, na hivyo kuchangia shinikizo la mfumuko wa bei. Hii inaweza kuathiri gharama ya maisha na shughuli za biashara.
2. Athari kwa Uwekezaji:
   • Hali ya Uwekezaji: Kupungua kwa sarafu kunaweza kuathiri hali ya uwekezaji, pengine kuzuia wawekezaji wa kigeni kutokana na hatari iliyoongezeka au marejeo madogo kwa fedha za ndani.
3. Majibu ya Sera:
   • Hatua za Fedha na Kifedha: Benki kuu inaweza kuhitaji kurekebisha sera za fedha, kama vile kuongeza viwango vya riba au kutekeleza hatua za kuimarisha sarafu. Marekebisho ya sera za kifedha pia yanaweza kuwa muhimu ili kushughulikia masuala ya kiuchumi yanayochangia kupungua.

1. Inflation

• Headline Inflation: The twelve-month headline inflation rate remained stable at 3.1% from April to June 2024, staying within the national target of 5% and regional benchmarks (EAC's 8% and SADC's 3-7%).
  • Energy and Fuel: Energy, fuel, and utility inflation rose to 13.5% in June 2024, driven by higher prices

2. Monetary Policy

• Monetary Aggregates: The Bank of Tanzania maintained an accommodative monetary policy stance to support economic recovery. As a result, extended broad money supply (M3) grew by 10.3% in the year ending June 2024, largely driven by an increase in net domestic assets.
  • Interest Rates: Interest rates remained relatively stable, with the overall lending rate averaging 16.61% in June 2024. The overnight interbank cash market rate decreased slightly to 3.81% in June 2024, down from 4.91% in March 2024.

3. Exchange Rate and External Sector

• Exchange Rate: The Tanzanian shilling (TZS) remained relatively stable against the US dollar, depreciating by only 0.2% between March and June 2024. The average exchange rate was around TZS 2,331 per USD in June 2024.
  • Exports: The value of goods and services exports increased by 10.2% in the year ending June 2024, largely due to improved performance in non-traditional exports, particularly gold and manufactured goods.
  • Imports: The value of imports of goods and services increased by 9.3% over the same period, with oil imports contributing significantly to this growth.
  • Current Account Deficit: The current account deficit widened to USD 1.4 billion in the year ending June 2024, primarily due to the increase in imports and a slowdown in private transfer receipts.

4. Fiscal Performance

• Government Revenue: Government revenue was TZS 27.3 trillion in the fiscal year 2023/24, which was 94% of the target. Tax revenue accounted for the majority, with domestic revenue collection being a key contributor.
  • Expenditure: Government expenditure was aligned with the revenue performance, with recurrent expenditure constituting the bulk of the spending. Development expenditure was directed towards infrastructure projects, particularly in transport and energy.
  • Public Debt: Tanzania’s public debt stood at USD 39.1 billion as of June 2024, which is about 41.2% of GDP. The debt remains sustainable, but the government is cautious about new borrowing, particularly non-concessional loans.

5. Economic Growth

• GDP Growth: Tanzania's economy is projected to grow by 5.2% in 2024, driven by improvements in the agriculture, manufacturing, and construction sectors. This growth is supported by government investments in infrastructure and reforms aimed at improving the business environment.
  • Sectoral Performance: The agriculture sector is expected to grow by 4.5%, with food crop production being a key driver. The manufacturing sector is anticipated to grow by 8.1%, bolstered by increased production of food products, beverages, and construction materials. The construction sector is projected to grow by 8.4%, driven by ongoing infrastructure projects.

6. Financial Sector

• Banking Sector: The banking sector remains stable and adequately capitalized, with an average capital adequacy ratio of 19.3% as of June 2024, well above the regulatory minimum of 10%.
  • Non-Performing Loans (NPLs): The ratio of NPLs to total gross loans decreased to 6.5% in June 2024, reflecting improved credit risk management by banks.
  • Financial Inclusion: Financial inclusion efforts continue to make progress, with the proportion of the adult population using formal financial services increasing to 86% in 2024, up from 83% in 2022.

Implication to Tanzania's economic development

1. Economic Growth and Development

• GDP Growth: Tanzania's economy is projected to grow by 5.2% in 2024. This growth is supported by government investments in infrastructure, particularly in the transportation and energy sectors, which are crucial for sustainable development.
• Sectoral Contributions: The agriculture, manufacturing, and construction sectors are the main drivers of economic growth. The focus on these sectors reflects Tanzania's strategy to diversify its economy and reduce dependency on traditional sectors such as agriculture by strengthening manufacturing and infrastructure development.

2. Infrastructure Development

• Transport and Energy Projects: Significant investments have been made in transport and energy infrastructure. These projects are expected to enhance connectivity and energy availability, which are vital for industrialization and overall economic development. The focus on these areas indicates the government's commitment to creating a conducive environment for economic activities.

3. Fiscal and Monetary Policies

• Supportive Monetary Policy: The Bank of Tanzania's accommodative monetary policy is aimed at supporting economic recovery and development. By keeping interest rates stable and ensuring adequate liquidity in the financial system, the government is fostering an environment conducive to business growth and investment.
• Government Revenue and Spending: Government revenue collection has been robust, with a focus on mobilizing domestic resources to fund development projects. The emphasis on infrastructure spending, particularly on transport and energy, is part of a broader strategy to stimulate economic development.

4. Private Sector Development

• Business Environment Reforms: The government has implemented reforms to improve the business environment, encouraging both local and foreign investments. These reforms are critical for private sector development, which is seen as a key driver of economic growth and job creation.

5. Financial Sector Stability

• Banking Sector and Financial Inclusion: A stable and well-capitalized banking sector, along with efforts to increase financial inclusion, are essential for supporting economic development. With more of the population having access to formal financial services, there is greater potential for entrepreneurial activities and investments, which contribute to overall economic growth.

6. Sustainable Development and Debt Management

• Public Debt: While Tanzania's public debt is increasing, it remains sustainable. The government's cautious approach to new borrowing, particularly non-concessional loans, reflects a strategy to maintain fiscal stability while funding essential development projects.
• Sustainable Growth Initiatives: The focus on sectors like agriculture, which employs a large portion of the population, and manufacturing, which adds value to raw materials, indicates a strategy aimed at achieving sustainable and inclusive growth.

7. Challenges and Outlook

• Inflation and External Pressures: While inflation has been kept in check, challenges such as rising energy and fuel prices could impact economic stability. Additionally, the widening current account deficit due to increased imports highlights the need for continued efforts to boost exports and manage external pressures.
• Future Prospects: The outlook for Tanzania’s economy remains positive, with ongoing projects and reforms expected to yield further growth. The emphasis on infrastructure, industrialization, and financial inclusion aligns with long-term development goals.

Balancing External Stability with Rising Domestic Obligations Amidst Economic Development

External Debt

• 21-Jun: TZS 76,539,331 million
• May-23: TZS 82,378,964 million
• Jun-24: TZS 76,410,554 million
• 1 Month Change: -7% (from May-23 to Jun-24)
• 1 Year Change: 0% (from 21-Jun to Jun-24)

Analysis: External debt decreased by 7% over the past month but remained relatively stable over the past year, showing no significant change.

Domestic Debt

• 21-Jun: TZS 28,927,100 million
• May-23: TZS 31,491,600 million
• Jun-24: TZS 31,938,200 million
• 1 Month Change: 1% (from May-23 to Jun-24)
• 1 Year Change: 10% (from 21-Jun to Jun-24)

Analysis: Domestic debt increased by 1% over the past month and by 10% over the past year, indicating a growing reliance on domestic borrowing.

Total Debts

• 21-Jun: TZS 105,466,431 million
• May-23: TZS 113,870,564 million
• Jun-24: TZS 108,348,754 million
• 1 Month Change: -5% (from May-23 to Jun-24)
• 1 Year Change: 3% (from 21-Jun to Jun-24)

Analysis: Total debt decreased by 5% over the past month but increased by 3% over the past year, reflecting fluctuations in both external and domestic debt levels.

Summary

• External Debt saw a decrease in the short term but remained stable year-on-year.
• Domestic Debt has been on the rise both monthly and annually, suggesting increased domestic borrowing.
• Total Debt has decreased recently but shows a slight increase over the year, indicating overall growth in the debt burden.

Tanzania's economic development and the debt

While the decrease in external debt is a positive sign, the rising domestic debt and overall increase in total debt are areas of concern. Effective debt management and strategic investments will be crucial for ensuring that debt remains sustainable and continues to support economic development without stifling growth.

1. External Debt Stability

• Current Status: External debt has decreased recently but remains steady over the year.
  • Implications: A stable external debt level suggests that Tanzania is managing its foreign obligations relatively well. The recent decrease might be due to repayments or reduced new borrowing. However, since there's no significant annual change, it indicates a balanced approach to managing foreign debt.

2. Rising Domestic Debt

• Current Status: Domestic debt has increased both recently and over the past year.
  • Implications: The growth in domestic debt could indicate increased government borrowing from local sources, which might be used for development projects or to address budget deficits. While this can stimulate economic activity, it also raises concerns about sustainability and potential crowding out of private sector investment. Higher domestic debt may lead to increased interest rates, affecting economic growth.

3. Overall Debt Dynamics

• Current Status: Total debt has decreased in the short term but has increased over the past year.
  • Implications: The short-term decrease in total debt might be a positive sign of improved fiscal management or reduced borrowing needs. However, the overall increase over the year suggests a growing debt burden, which could have implications for economic stability and future fiscal policy.

4. Economic Growth and Debt Sustainability

• Economic Growth: The increase in total debt, especially domestic debt, could be a result of efforts to finance infrastructure and development projects, which are crucial for economic growth. However, if debt levels rise faster than economic growth, it could lead to sustainability issues.
  • Debt Sustainability: Maintaining a balance between borrowing and revenue generation is crucial. A rapid increase in domestic debt, in particular, can lead to higher debt servicing costs, potentially impacting public investment and services.

5. Policy Implications

• Fiscal Policy: The government might need to focus on improving fiscal policies to manage both external and domestic debt effectively. This could involve enhancing revenue collection, controlling expenditures, and ensuring that debt financing supports growth-enhancing investments.
• Economic Reforms: Addressing the rising domestic debt might require reforms to improve economic efficiency and attract more private investment.

Improved Trade Balance and Strengthened Reserves Amid Economic Growth

External Sector Performance Overview

The external sector performance of Tanzania has shown notable improvements due to several factors:

1. Current Account Deficit

• June 2024: USD 2,501.3 million
• June 2023: USD 4,955.6 million

The current account deficit decreased significantly from USD 4,955.6 million in June 2023 to USD 2,501.3 million in June 2024. This represents a reduction of approximately 49.5% year-on-year. The current account deficit reached its lowest point since July 2023.

2. Foreign Exchange Reserves

• End of June 2024: USD 5,345.5 million

Foreign exchange reserves improved to USD 5,345.5 million by the end of June 2024. This level of reserves is adequate to cover 4.4 months of projected imports of goods and services, aligning with both national and East African Community (EAC) benchmarks.

3. Current Account Breakdown

Here’s a closer look at the different components of the current account for June 2024 compared to previous periods:

Goods Account

• June 2024: USD -303.8 million
• June 2023: USD -415.6 million
• Change: Improvement from a deficit of USD 415.6 million to USD 303.8 million.

Exports increased from USD 623.9 million in June 2023 to USD 704.2 million in June 2024, an increase of approximately 12.9%.
Imports decreased from USD 1,039.6 million in June 2023 to USD 1,008.0 million in June 2024, a decrease of approximately 3.1%

Services Account

• June 2024: USD 434.8 million
• June 2023: USD 343.75 million
• Change: Improvement from a surplus of USD 343.75 million to USD 434.8 million.

Receipts rose from USD 515.3 million in June 2023 to USD 609.6 million in June 2024, an increase of approximately 18.3%.
Payments remained relatively stable, increasing slightly from USD 171.6 million in June 2023 to USD 174.8 million in June 2024.

1. Goods and Services

• June 2024: USD 131.0 million
• June 2023: USD -71.9 million
• Change: Turned from a deficit to a surplus.

Exports of goods and services increased from USD 1,139.3 million in June 2023 to USD 1,313.8 million in June 2024, an increase of about 15.3%.
Imports of goods and services decreased from USD 1,211.2 million in June 2023 to USD 1,182.8 million in June 2024, a decrease of approximately 2.3%.

1. Primary Income Account

• June 2024: USD -181.1 million
• June 2023: USD -132.6 million
• Change: Worsened from a deficit of USD 132.6 million to USD 181.1 million.

Receipts increased slightly from USD 13.5 million in June 2023 to USD 17.5 million in June 2024.
Payments also increased from USD 146.1 million in June 2023 to USD 198.6 million in June 2024.

1. Secondary Income Account

• June 2024: USD 45.0 million
• June 2023: USD 102.7 million
• Change: Declined from a surplus of USD 102.7 million to USD 45.0 million.

Inflows decreased from USD 111.2 million in June 2023 to USD 56.8 million in June 2024.
Outflows increased from USD 8.5 million in June 2023 to USD 11.7 million in June 2024.

Summary of Key Figures

• Current Account Deficit: Reduced by 49.5% from USD 4,955.6 million in June 2023 to USD 2,501.3 million in June 2024.
• Foreign Exchange Reserves: Increased to USD 5,345.5 million, enough to cover 4.4 months of imports.
• Export of Goods and Services: Increased by 14.9% from USD 12,780.4 million in 2023 to USD 14,680.7 million in 2024.
• Import of Goods and Services: Decreased by 5.6% from USD 16,980.4 million in 2023 to USD 16,027.0 million in 2024.

The external sector performance and Tanzania's economic development

1. Improved Balance of Payments

The significant reduction in the current account deficit—from USD 4,955.6 million in June 2023 to USD 2,501.3 million in June 2024—suggests that Tanzania's balance of payments is improving. This is a positive sign for the country's economic stability and growth prospects. A lower current account deficit means that the country is importing less relative to its exports, which can be beneficial for economic sustainability.

2. Enhanced Foreign Exchange Reserves

With foreign exchange reserves increasing to USD 5,345.5 million, Tanzania is in a stronger position to manage its external payments and financial obligations. The reserves are sufficient to cover 4.4 months of projected imports, which is in line with the recommended benchmarks for economic stability. This level of reserves can help buffer against external shocks and provide confidence to investors and international markets.

3. Export Performance

The increase in exports of goods and services—from USD 12,780.4 million in 2023 to USD 14,680.7 million in 2024—indicates a positive trend in Tanzania's external trade. Stronger export performance can contribute to higher foreign exchange earnings and support economic growth. This improvement reflects positively on the country’s trade policies and competitiveness in international markets.

4. Import Management

The decrease in the import bill—from USD 16,980.4 million in 2023 to USD 16,027.0 million in 2024—suggests effective import management and possibly enhanced domestic production. Lower imports relative to exports can help reduce the current account deficit and support economic growth by reducing dependence on foreign goods and services.

5. Sectoral Performance

• Goods Account: The improvement in the goods account deficit (from USD -415.6 million in June 2023 to USD -303.8 million in June 2024) indicates better trade performance in terms of goods. This could be due to increased production, better terms of trade, or successful export diversification.
• Services Account: The rise in the services account surplus (from USD 343.75 million to USD 434.8 million) shows that Tanzania is benefiting from services exports, such as tourism, financial services, or transport. This is a positive indicator of the country's growing service sector.

6. Primary Income and Secondary Income Accounts

• Primary Income Account: The worsening deficit in the primary income account (from USD -132.6 million to USD -181.1 million) suggests increased payments for primary income, such as interest, dividends, and wages. This may indicate a higher level of foreign investment or debt servicing costs.
• Secondary Income Account: The decline in the secondary income surplus (from USD 102.7 million to USD 45.0 million) points to reduced remittances or transfers. This could impact the overall disposable income and spending power of households that rely on such inflows.

Implications for Economic Development

1. Economic Stability: The reduction in the current account deficit and improvement in foreign exchange reserves suggest that Tanzania is making progress toward economic stability. This stability is crucial for attracting foreign investment and sustaining economic growth.
2. Growth Prospects: Improved export performance and controlled imports indicate that Tanzania is on a path of economic growth. Enhanced trade balance and export earnings can provide the necessary resources for development projects and infrastructure improvements.
3. Policy Effectiveness: The positive trends reflect the effectiveness of economic policies related to trade, export promotion, and import management. Continued focus on these areas can further strengthen economic performance.
4. Investment Climate: A more stable external sector and higher foreign exchange reserves can improve investor confidence, potentially leading to increased foreign direct investment and development in various sectors of the economy.
5. Challenges Ahead: While the external sector is performing well, challenges such as primary income deficits and declining secondary income surpluses need to be addressed to ensure balanced and sustainable economic development.

Recent Trends in Interbank Cash and Foreign Exchange Markets Amid Economic Developments

Interbank Cash Market (IBCM)

1. Transaction Volume:
   • June 2024: Transactions totaled TZS 1,277.6 billion.
   • Previous Month: Transactions were TZS 1,581.2 billion.
   • Change: The transaction volume decreased by TZS 303.6 billion, which represents a decrease of approximately 19.2%.
2. 7-Day Transactions:
   • Percentage of Total Turnover: 37.6%.
   • This indicates that a substantial portion of the total transactions in the IBCM was concentrated in 7-day instruments, highlighting their dominance in the market.
3. Interest Rates:
   • June 2024: The overall IBCM interest rate was 7.36%.
   • Previous Month: The rate was 7.34%.
   • Change: There was a slight increase of 0.02 percentage points, or approximately 0.3%.

Interbank Foreign Exchange Market (IFEM)

1. Market Participation:
   • Increased Participation: Attributed to increased foreign exchange inflows from tourism, gold exports, and cash crops.
2. Net Sales:
   • Bank Sales: The Bank sold USD 0.25 million on a net basis.
   • Commercial Bank Sales: Commercial banks sold USD 7.7 million.
   • This indicates higher selling activity by commercial banks compared to the central bank, reflecting greater liquidity in the market.
3. Exchange Rate:
   • June 2024: The shilling traded at an average rate of TZS 2,626.07 per USD.
   • Previous Month: The rate was TZS 2,599.05 per USD.
   • Change: The shilling depreciated by TZS 27.02, or approximately 1.0% compared to the previous month.
4. Annual Depreciation:
   • Annual Depreciation: The shilling depreciated by 12.5% compared to the same month in the previous year.
   • This indicates a significant annual weakening of the shilling against the US dollar.

Figures Recap:

• IBCM:
  • Total Transactions: Down from TZS 1,581.2 billion to TZS 1,277.6 billion.
  • 7-Day Transactions: 37.6% of total.
  • Interest Rate: Increased from 7.34% to 7.36%.
• IFEM:
  • Net Bank Sales: USD 0.25 million.
  • Net Commercial Bank Sales: USD 7.7 million.
  • Exchange Rate: Increased from TZS 2,599.05 to TZS 2,626.07 per USD.
  • Annual Depreciation: 12.5%.

Tanzania’s economic development, Interbank cash and foreign exchange markets

Interbank Cash Market (IBCM)

1. Transaction Volume Decline:
   • Decrease in Transactions: The significant drop in transaction volume from TZS 1,581.2 billion to TZS 1,277.6 billion suggests a contraction in market activity. This could indicate reduced liquidity or less demand for short-term funding in the banking sector, potentially reflecting broader economic uncertainties or tightening financial conditions.
2. Dominance of 7-Day Transactions:
   • Market Preferences: The dominance of 7-day transactions (37.6% of total turnover) indicates that short-term financing remains a key component of the market. This preference might suggest a cautious approach by banks, possibly due to uncertainty in the economic outlook or a need for flexibility in their liquidity management.
3. Interest Rate Trends:
   • Slight Increase in Rates: The small increase in the overall IBCM interest rate from 7.34% to 7.36% reflects a marginal rise in the cost of short-term borrowing. This might be indicative of tightening monetary conditions or a response to inflationary pressures, which could affect borrowing costs for businesses and consumers.

Interbank Foreign Exchange Market (IFEM)

1. Increased Foreign Exchange Inflows:
   • Source of Inflows: The increase in foreign exchange inflows from tourism, gold exports, and cash crops highlights a positive aspect of Tanzania’s economic performance. Strong foreign exchange inflows from these sectors can support the country’s balance of payments and strengthen its foreign reserves, which is beneficial for economic stability.
2. Net Sales and Market Activity:
   • Commercial Bank Sales: The significant net sales by commercial banks (USD 7.7 million) compared to the central bank’s net sales (USD 0.25 million) suggest robust activity and possibly increased demand for foreign currency. This could be related to higher import demand or foreign investments.
3. Exchange Rate Trends:
   • Shilling Depreciation: The depreciation of the Tanzania shilling from TZS 2,599.05 to TZS 2,626.07 per USD, along with a 12.5% annual depreciation, reflects a weakening currency. This could be a result of various factors, including trade imbalances, inflationary pressures, or capital flight. A weaker currency can impact import costs, inflation, and overall economic stability.

Implications for Economic Development

1. Liquidity and Monetary Policy:
   • The decline in IBCM transaction volumes and the slight rise in interest rates suggest that liquidity conditions in the banking sector are tightening. This could influence economic growth by making borrowing more expensive and potentially slowing down investment and consumer spending.
2. Economic Activity and Exchange Rates:
   • The increased foreign exchange inflows from key sectors are positive for Tanzania’s economy, indicating strong performance in tourism, exports, and agriculture. However, the depreciation of the shilling could lead to higher import costs and inflation, which might affect consumer purchasing power and economic stability.
3. Inflation and Investment Climate:
   • A weaker currency and higher interest rates can contribute to inflationary pressures, which might affect the cost of living and business operations. This could impact the overall investment climate, influencing both domestic and foreign investment decisions.
4. Policy Adjustments:
   • The central bank might need to consider monetary and fiscal policy adjustments to address the challenges posed by currency depreciation and tightening liquidity. Ensuring a stable macroeconomic environment will be crucial for sustaining economic growth and development.